Construction industry
Growth returns in North America, driven by infrastructure, energy, and data centers.
Across the US and Canada, construction is showing modest growth, but activity is uneven and concentrated in areas where public funding and private investment are supporting major programs.
Infrastructure and energy programs continue to provide the clearest pipeline of work, spanning transport, utilities, grid upgrades, renewable energy, and longer-term nuclear expansion. At the same time, AI-driven digital infrastructure is reshaping demand, with data center programs expanding even as early signs of moderation emerge.
Delivery conditions, not demand, are setting the pace.
Power availability, interconnection delays, and planning requirements are extending timelines. Skilled trade shortages, especially across mechanical, electrical, and plumbing (MEP) roles, are raising labor premiums and reducing schedule certainty.
Across sectors the common differentiator is execution readiness.
This is most critical for large, multi-site programs and projects in fast-growth or remote locations. Early planning for cost, power, and labor, supported by modular delivery of MEP and electrical packages where feasible, is increasingly what separates deliverable schedules from programs that stall.
Construction output and inflation
Click on a link to view construction industry overviews by country
Construction costs across the US and Canada are set to remain elevated through 2026, driven by persistent labor shortages, tariffs and geopolitics‑driven material inflation, extended procurement timelines, and higher financing costs.
US construction inflation is now forecast at 4.5% to 5.5% in 2026, revised upward from our January 2026 report. The revision reflects the impact of the conflict in the Middle East, which is adding renewed pressure to energy, freight, and logistics costs, and feeding through to materials and equipment pricing. Labor markets, subcontractor utilization, and sustained pressure in mechanical and electrical trades continue to keep costs elevated, while trade‑policy volatility has already delayed or paused projects, with further cost impacts expected to materialize through the year.1 2 3
Associated Builders and Contractors' (ABC) analysis of the U.S. Bureau of Labor Statistics' Producer Price Index (PPI) data, released on June 11th 2026, showed that non-residential construction input prices rose 2.4% in May 2026 and 9.7% YoY, as higher energy prices increased pressure across the supply chain.4 Supply chains are rerouting away from China, raising lead times and procurement costs. Cement pricing is expected to be flat in 2026, but procurement timelines for data center and infrastructure components remain extended across the US and Canada, stressing schedules and budgets.5
Labor shortages persist due to an aging workforce and limited new entrants, keeping wages competitive. The Federal Reserve held rates steady in April 2026, with no cuts expected through 2027, so financing relief is unlikely.
In Canada, construction inflation is expected to hold in the 3% to 4% range in 2026, with tariffs on metals and labor shortages continuing to pressure budgets and timelines. Healthcare, institutional, and specialty projects in Calgary, Edmonton, Winnipeg, and Ottawa face additional upward pressure from specialized trades, green building requirements, and evolving code standards. The federal government's CA$115bn infrastructure commitment provides a demand counterweight, though cost discipline and early procurement planning remain essential across both markets heading into the second half of 2026.6 7 8
Cost pressures in Canada persist due to global supply chain disruption, a weak Canadian dollar, and rising prices for technology and low‑voltage equipment. Labor shortages continue across skilled MEP trades, particularly electricians. Additionally, the market is impacted by a constrained supply of general contractors with data center expertise.
The construction inflation forecast reflects our current view of construction inflation, based on the evidence available at the time of publication. The outlook remains uncertain, particularly given the ongoing geopolitical disruption and its potential impact on energy prices, supply chains, and input costs. The estimate should therefore be treated as a point-in-time forecast and may change as conditions evolve.
Sector overviews
Data center construction continues to expand and is increasing electricity demand, which is driving parallel investment in generation, storage, transmission, and grid connection capacity.
Power access and interconnection timelines are now decisive inputs to location selection and program phasing. Planning, consultation, and permitting requirements are also extending delivery timelines in some markets, raising the importance of early engagement with utilities and regulators.
In the US, data centers continue to drive growth, while grid capacity and interconnection delays set the pace of delivery. Construction spending on data centers remains the fastest-growing sector in early 2026, despite early signs of moderation. Growth is also spreading beyond established hubs. West Texas, Wisconsin, and Indiana are gaining momentum, while Northern Virginia faces higher costs, power constraints, and stricter permitting. The Electric Power Research Institute (EPRI) forecasts data centers could account for 9% to 17% of US electricity consumption by 2030, up from an estimated 4% to 5% in 2024. Labor constraints are a key delivery risk, particularly across electrical trades, plumbing, pipefitting, and specialist welding. More than 80% of contractors report difficulty hiring, which is pushing up premium labor rates and affecting both productivity and schedule certainty.9
In Canada, data centers also remain a major growth driver, supported by the Canadian Sovereign AI Compute Strategy, which committed CA$2bn over five years in Canada’s 2024 federal budget and includes up to CA$700m to support the development of AI-focused data centers through a competitive funding process.
The life sciences sector is seeing companies make historic investments in the US, with around US$37bn of pharmaceutical manufacturing construction projects announced in 2025.
This reflects a wider upswing in investment in life sciences, with major pharmaceutical manufacturers announcing over $370bn in investment in the US between 2026 and 2030.10 Indiana, Virginia, North Carolina, and Pennsylvania are major delivery hubs, supported by lower land costs, strong state incentives, and infrastructure investment.
In Canada, recent federal announcements point to continued investment in life sciences facilities, including biomanufacturing capacity and research infrastructure. In April 2026, the Government of Canada announced support for projects involving Aspect Biosystems and Providence Health Care, including Providence’s new St. Paul’s Hospital and Clinical Support and Research Centre campus. Earlier announcements in 2025 also supported OmniaBio’s facility expansion in Hamilton and Entos Pharmaceuticals’ 103,000-square-foot biomanufacturing facility and research and development center in Edmonton. More broadly, as of October 2025, the Government of Canada reports investments of more than CA$2.5bn across 43 projects in the biomanufacturing, vaccine and therapeutics ecosystem.11 12 13
Workforce constraints remain a key barrier to the sector’s growth in Canada, with shortages of specialist staff limiting the ability to operate and scale biomanufacturing facilities. Research by CASTL, with BioTalent Canada and the Future Skills Centre, shows 74% of employers plan to hire within three years, yet persistent talent gaps, particularly in manufacturing and production roles, continue to constrain expansion.14 15 16
High-tech industrial sectors are recovering.
The US high-tech industrial market is becoming more differentiated, with semiconductor construction supported by a multi-year project pipeline, while battery-related construction is more sensitive to market conditions and demand visibility.
High-tech industrial construction in Canada is more concentrated and more closely linked to government-led industrial strategy, with current visible activity dominated by a limited number of large EV battery manufacturing projects.
Infrastructure and energy work continues to underpin activity across North America.
Public funding and policy priorities are supporting transport programs, utilities renewal, and grid upgrades, alongside continued investment in renewable energy and nuclear capacity. However, funding capacity is tightening and competition for capital from digital infrastructure is increasing. As a result, programs are more likely to be phased, increasing the importance of prioritization, sequencing, and realistic scheduling.17 18 19
Commercial activity is selective.
Office recovery across the US remains uneven, with improvement concentrated in leading gateway and technology-led markets. Demand is strongest for high-quality, Class A buildings, particularly in markets such as Manhattan and San Francisco, while older buildings often require reinvestment to remain competitive.
Leasing momentum is a stronger near-term indicator of construction activity than new-build starts. While ground-up office development remains subdued, stronger leasing in prime assets is driving tenant improvement, fit-out, and refurbishment work as occupiers reconfigure space and upgrade workplace technology.
In 2026, commercial opportunity is expected to center on fit-out and repositioning of well-located, high-performing assets, rather than broad-based new office development. Cost pressure is most acute in fit-out, driven by scarce mechanical, electrical, and plumbing labor, and competition for materials and equipment from major digital infrastructure programs.
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